Deal values in the insurance industry have risen 290% compared with the first half of 2014, A.M Best has revealed.
The latest
Best’s Special Report noted that the market has seen the “return of the mega deal” as a number of billion dollar mergers hit the global industry.
It is not only the value of deals that has increased exponentially, as the number of deals has also taken a 73% bump with 76 global transactions so far this year.
“Throughout 2015, we have seen an increasing number of large deals and an unprecedented level of deal value taking place,” the report states.
“2015 looks to be a record year for M&A in the insurance industry and has already exceeded the combined value of the last several years.”
The report notes that the deal-spree is seeing already large, multi-national companies increases the size and scope of their operations.
“We continue to see already large global companies expand their reach even further through international M&A deals.”
The report takes a further look at the
recently announced deal that will see ACE and Chubb combine in a blockbuster deal representing one of the biggest in history.
“The
Chubb/ACE deal represents one of the largest insurance M&A deals in history and the USD 29 billion deal will elevate two dominant companies into elite status in many of their markets,” the report said.
“The deal will combine commercial and property/casualty insurance lines with a balance of products that aims to reduce the combined entity to pricing cycles and generate an estimated USD 650 million in annual run-rate synergies to be realized by 2018.
“It’s estimated that the combined companies will generate USD 31.5 billion in global net premiums written (NPW) with USD 19 billion coming from the United States.”
The A.M Best report also notes the seven drivers behind the increased M&A activity as companies look to strengthen through purchase across the globe:
1. Increased capital efficiency and scale to drive down costs through synergies
2. Consolidation to increase the buying power of pricing and terms and conditions
3. Diversified product lines and reduced exposure to market cycles and improved growth
4. Cheaper funding (low interest rates, high stock prices, cash on hand)
5. Vertically integrated and enhanced distribution channels
6. Increased availability and, sometimes non-traditional, sources of capital
7. General fear of being left behind
